California imposes an income tax on the entire taxable income of state residents. Cal. Rev. & Tax. Code § 17041. For those individuals seeking to avoid taxation by the state, the question becomes: what makes a California resident for income tax purposes? Below we provide a brief overview of the various legal concepts involved in and tests applied during the residency analysis. Note, California also taxes nonresidents on income from California sources, but we save that discussion for a future post.

A California “resident” includes an individual who is either (1) in California for other than a “temporary or transitory purpose,” or (2) domiciled in California, but outside California for a “temporary or transitory purpose.” Cal. Rev. & Tax. Code § 17014(a). Presence within California for more than nine months of a taxable year creates a rebuttable presumption of California residence. Cal. Rev. & Tax. Code § 17016; 18 Cal. Code Regs. § 17016. However, presence within California for less than nine months does not create a presumption of nonresidency. Appeal of Warren L. and Marlys C. Christianson, Cal. St. Bd. of Equal., 72-SBE-022 (July 31, 1972).

Residence and Domicile

“Residence” and “domicile” are distinct concepts for California tax purposes. “Domicile” refers to the place where an individual has his true, fixed, permanent home and principal establishment, and to which place he has, whenever he is absent, the intention of returning. Cal. Rev. & Tax. Code § 17014(c). “Residence” denotes any factual place of abode of some permanency, that is, “more than a mere temporary sojourn.” Whittell v. Franchise Tax Bd. (1964) 231 Cal.App.2d 278, 284. While a taxpayer may have more than one residence simultaneously for different purposes, a taxpayer may only have one domicile at any given time. Id. A domicile cannot be lost until a new one is acquired. Estate of Phillips (1969) 269 Cal.App.2d 656, 659. Once acquired, a domicile is presumed to continue until it is shown to have changed. 18 Cal. Code Regs. § 17014(c).

In most situations, a person’s domicile and residence are the same physical location. However, when domicile is an issue in a residency case, domicile is always decided first. For California domiciliaries, the focus is upon whether the taxpayer is absent from California for a temporary or transitory purpose. If so, the taxpayer is a California resident. For non-California domiciliaries (such as those domiciled in another state or country), the focus is upon whether he/she is in California for other than a temporary or transitory purpose. Whether a person is present or absent from California for a temporary or transitory purpose depends on his or her subjective intent for being inside or outside California, as primarily demonstrated through physical acts. Noble v. Franchise Tax Bd. (2004) 118 Cal.App.4th 560, 567. Consequently, the determination of intent “will depend to a large extent upon the facts and circumstances of each particular case.” 18 Cal. Code Regs. § 17014(b).

For example, in the Appeal of Matthew Palmer and Kristin Stone, the California Office of Tax Appeals (“OTA”) concluded that the taxpayer remained a domiciliary of California despite his stated intention to remain in Colorado indefinitely after moving there to take a job. 2019-OTA-183 (May 24, 2019) (nonprecedential). The taxpayer’s stated intention alone was insufficient to establish that he created a new domicile in Colorado absent any objective facts to that effect, such as purchasing real property, registering to vote, obtaining a driver’s license, or in fact remaining in Colorado after being terminated from his new job there. When the taxpayer moved back to California, “he left no trace that intended to establish a domicile in Colorado.”

California considers two tests when determining what constitutes a temporary or transitory purpose: (1) the identifiable purpose test; and (2) the close connections test.

Identifiable Purpose Test

If an individual is in or out of California for an identifiable purpose (e.g., to begin new employment or to commence studies), whether their purpose is temporary or transitory depends on the length of time required for the purpose to be completed. “[I]f an individual is simply passing through [California] on his way to another state or country, or is here for a brief rest or vacation, or to complete a particular transaction, or perform a particular contract, or fulfill a particular engagement, which will require his presence in this State for but a short period, he is in [California] for temporary or transitory purposes, and will not be a resident by virtue of his presence here.” 18 Cal. Code Regs. § 17014(b). Conversely, “where an individual expects to be out of California for an indefinite period of time which is expected to last more than two years, such individual will be expected to be out of the state for an indefinite period of substantial duration” and therefore is no longer considered a resident of California. Appeal of William G. and Susan G. Crozier, Cal. St Bd. of Equal., 92-SBE-005 (Apr. 23, 1992).

Close Connections Test

The “close connections test” focuses upon a person’s contacts with his/her new place of abode as compared to the contacts in California. See Klemp v. Franchise Tax. Bd. (1975) 45 Cal.App.3d. 870 (residents of Illinois who remained in business there did not become California residents as result of spending more time at a vacation home in Palm Springs than in Chicago). The underlying theory of the California residency scheme “is that the state with which a person has the closest connection during the taxable year is the state of his residence.” 18 Cal. Code Regs. § 17014(b).

In determining a person’s “closest connections,” California analyzes the following factors:

  • where all of the taxpayer’s residential real property is located, and the approximate values and sizes of the residences;
  • where the taxpayer’s spouse and children live;
  • where the taxpayer’s children attend school;
  • where the taxpayer claims any homeowner’s property tax exemption for a residence;
  • from where the taxpayer’s telephone calls originate;
  • the number of days the taxpayer spends in California versus the number of days the taxpayer spends in any other state;
  • the general purposes of the days spent in and out of California;
  • where the taxpayer files federal and state tax returns;
  • the state of residence claimed by the taxpayer on tax returns;
  • the location of any bank or savings accounts the taxpayer has;
  • where the taxpayer has memberships in professional, social, and religious organizations;
  • where the taxpayer registers any vehicles owned;
  • where the taxpayer maintains a driver’s license;
  • where the taxpayer maintains voter registration, and the taxpayer’s voting participation history;
  • where the taxpayer receives professional services, like attorneys, accounts, dentists, and doctors;
  • where the taxpayer has employment;
  • where the taxpayer owns or maintains business interests;
  • where the taxpayer holds any professional licenses;
  • where the taxpayer owns investment real property; and
  • indications in affidavits from people discussing the taxpayer’s residence.

Appeal of Stephen D. Bragg, Cal. St. Bd. of Equal., 2003-SBE-002 (May 28, 2003). While all factors may be considered, no one factor is dispositive.


California residency cases can be complex and are very factually intensive. Individuals seeking to leave or who have recently left the state should be wary of the proof required to demonstrate a change in domicile or residence. Additionally, all California residents who desire to become nonresidents of California face two automatic “strikes”, namely: (1) a Franchise Tax Board audit determination is presumed correct; and (2) the taxpayer has the burden of proving it wrong. These two “strikes” are not insurmountable, though – with appropriate planning, they can be overcome with the presentation of well-documented facts supporting nonresidency. Please contact any member of Eversheds Sutherland’s SALT team should you have any questions regarding California income tax and residency.